In the third quarter of 2023, agricultural credit conditions in the Kansas City Fed’s Tenth District softened compared to a year ago. This was the second straight quarter that farm income and loan repayment rates were lower. However, the moderation was more pronounced in areas hit hardest by drought, but more tempered in areas most concentrated in cattle production. Despite this, agricultural real estate values in the region remained firm.
The ag economy has softened in recent quarters alongside a moderation in commodity prices, which have been significantly higher than they were two years ago. Additionally, elevated production costs have contributed to a drop in the price of many key products during the past year. These factors have likely reduced farm income in 2023, despite high-interest costs. However, ag loan performance has remained solid with ongoing support from strong finances during the past two years.